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European Constitution to cost Britain
£200bn
AS the French and Dutch
reject the EU Constitution, an explosive report has revealed
that the cost of
Britain's membership of the European Union (EU) could
easily top £200bn
(E290bn, $366bn) a year if the European Constitution is
adopted.
The research by Patrick
Minford, Vidya Mahambare and Eric Nowell of Cardiff
Business School -
published by the Institute of Economic Affairs - is the
most detailed
cost-benefit analysis of the UK's membership of the EU.
The research demolishes
the findings of previous reports, which purported to
find a small economic
benefit from membership, and it will deal a bitter
blow to Prime Minister
Tony Blair's campaign for a yes vote in the promised
UK referendum on the EU
constitution. Opinion polls suggest widespread
opposition in the UK.
Philip Booth, editorial
director at the Institute of Economic Affairs, said:
"The cost of the EU to
Britain is equivalent to the UK economy remaining
stagnant for eight years.
This shows that the UK is severely damaged by the
EU's current and proposed future policies - as indeed are most people
in the
rest of the EU."
There are five main areas
in which the EU is already imposing huge costs on
Britain: direct
contributions, higher food prices, higher costs for
manufactured goods; the
absence of competition in services; and the
harmonisation of
regulations and red tape, the report says.
Future costs are also
likely to include more harmonisation of labour market
regulations prompted by
decisions by European judges, as well as the
possibility, at some
point, of having to help to bail out bankrupt pension
systems in Italy and
other countries. Britain's net contribution is worth
about 0.4% of UK GDP
every year, Minford said. In addition, the common
agricultural policy (CAP)
costs the UK between 0.3% and 0.5% of GDP a year.
Higher costs for other
goods and services, which arise because of the EU's
protectionism, lack of
competition and a host of invisible barriers, is
costing the UK 2.5% to 3%
of GDP a year.
On top of these existing
annual costs of about 3.7% of GDP, worth about
£40bn a year to the
UK economy, the cost of harmonisation could eventually
hit between 6% and 25% of
GDP. Bailing out European pensions could cost
between 2% and 9% of UK
GDP.
The harmonisation of
Britain's relatively light labour market laws to the
standards seen in the
rest of the EU under the constitution's charter of
fundamental rights would
destroy 1.8m UK jobs, leading to a surge in
unemployment. It would
also reduce output by 6.4%, equivalent to about £70bn
a year.
Minford draws on findings
that personal computers cost 29.1% more on average
in Europe than in the US,
brown goods cost 81.3% more, white goods 21% more
and small domestic
appliances are 30.7% more expensive.
He said: "The common
agricultural policy raises food prices by about a half.
Less well-known is the
fact that the EU's informal agreements and
anti-dumping procedures
raise manufacturing prices by a similar amount.
"For example, they raise
the price of cars and furniture by around
three-quarters and the
price of TVs and audio equipment by around two-
thirds. These price rises
result from the pervasive protectionism that lies
at the core of EU
policies." Assuming that the EU fails to change, the UK
should renegotiate its
terms of membership to avoid the damaging effects of
existing policies, the
report argues.
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